The seal of the U.S. Securities and Exchange Commission hangs on the wall at SEC headquarters in Washington, D.C.

REUTERS/Jonathan Ernst/File Photo

Good morning. Firms should expect more remote oversight from the U.S. Securities and Exchange Commission as the agency leverages technology to keep track of a growing number of investment advisers, says a longtime compliance industry professional.

The SEC in fiscal year 2017 achieved examination coverage of about 15% of all U.S. investment advisers, up from 8% five years earlier, the agency said in February. Despite the gains, Jackie Hallihan, director of Ascendant Compliance Management, a compliance consulting services company, told Risk & Compliance Journal people need to be realistic as to how many examinations the SEC can conduct, given its limited resources.

“More and more we will see remote, focused, limited-scope examinations by regulators,” she said. “They can conduct reviews remotely, request documentation, analyze with their own analytics, and where there is a risk they can go in. It leverages resources and…it’s just much more efficient. I really think it’s inevitable because of the growth of the industry and the resources the SEC has.”

In a report released Feb. 7, the SEC’s Office of Compliance Inspections and Examinations wrote: “Given the percentage of investment advisers that are either newly registered or that have not been examined in some time, we will continue to make risk-based assessments and select those investment advisers for examination that have elevated risk profiles.”

Investment adviser firms, too, are making more and better use of technology as they face increased oversight and more complexity in the number and scope of regulations, said Ms. Hallihan.

“I see people today with spreadsheets or documents…but more and more these functions are being moved to cloud-based solutions,” said Ms. Hallihan. “This really causes problems for investment firms in terms of manual processes, growth of personnel and managing that growth.”

Technology can help firms review certain persons in their firm, their personal trading; to do so without technology virtually is impossible, said Ms. Hallihan, as technology is needed to get electronic feeds, to review the code of ethics, to make sure employees and traders aren’t trading ahead of clients.

“When there is a requirement to make sure you are reviewing communications, to do surveillance, to do remedial reviews, you need technology just to stay ahead,” she said. “There has to be a technology system, you can’t do it anymore the way things used to be done.”

EXCLUSIVE ON RISK AND COMPLIANCE JOURNAL

U.S. targets Libyan oil-smuggling operation. WSJ Risk & Compliance Journal reportsthe U.S. Treasury Department put sanctions on six people, 24 entities and seven vessels for their roles in allegedly smuggling oil from Libya to Europe. The sanctions designations were authorized under a U.S. executive order targeting those fomenting instability in Libya. Oil smuggling undermines Libya’s sovereignty, fuels a black market and contributes to regional instability, Treasury said.

The move targeted two Maltese men who allegedly formed an unofficial consortium for smuggling Libyan oil to Malta and Italy in an operation that reportedly earned them more than 30 million euros, Treasury alleged. The operation involved transporting the oil to European ports, where it was sold using falsified fuel certificates and shell companies, Treasury said.

Analytics firm says it’s been cleared in FCPA probes. Teradata Corp., a data-analytics company that disclosed a probe of potential bribery in August, said on Friday it won’t face enforcement action from U.S. regulators. The company, based in Dayton, Ohio, said on Aug. 4 it initiated an internal probe of whether it violated the Foreign Corrupt Practices Act after discovering questionable spending for travel, gifts and other items at a subsidiary doing business in Turkey.

COMPLIANCE

Appeals court backs gay employees in antidiscrimination case. Employers can’t discriminate based on sexual orientation, a U.S. appeals court ruled on Monday, siding with a gay sky-diving instructor dismissed from his job in 2010, New York Times reported. U.S. Justice Department lawyers argued in favor of the ban, putting them at odds with attorneys from the U.S. Equal Employment Opportunity Commission.

NLRB vacates pro-union ruling. An ethical misstep by a National Labor Relations Board member has caused the body overseeing union-employer disputes to vacate one of the most significant decisions it made last year, WSJ reports. The board on Monday withdrew a December decision that overturned an Obama-era ruling that could have made it easier for contractors and workers at franchised businesses to form unions and collectively bargain with big corporations.

Regulator takes aim at market manipulation. U.S. derivatives regulators are expected to file “more than 10” fraud and market-manipulation cases in the next weeks as the Commodity Futures Trading Commission chairman implements his back-to-basics approach, WSJ reports, citing a person familiar with the CFTC’s enforcement operation.

Trump Organization donates foreign profits. The Trump Organization donated the profits it earned from foreign governments in 2017 but wouldn’t say Monday how much money was donated or which governments spent the money, Washington Post reports.

Court backs vehicle ban in Germany. A German court ruled Tuesday in favor of environmental groups and against the auto industry when it said cities can ban vehicles from some roads to reduce air pollution, New York Times reports.

Trucking firm sued over worker classifications. A trucking subsidiary of XPO Logistics Inc. is being sued in California for allegedly denying drivers wages and benefits by misclassifying them as independent contractors instead of employees, WSJ reports.

DATA SECURITY

Suspected cybercrime mastermind arrested. The alleged head of an international cybercrime organization was arrested Monday by authorities in Ukraine, Radio Free Europe/Radio Liberty reports. Hennaidy Kapkanov is the suspected mastermind of the Avalanche cybercrime gang.

Companies working to meet GDPR deadline. European privacy regulations about to go into effect bring a new reality to companies and public sector organizations: Individuals are gaining more rights to control their own data. WSJ CIO Journal reports the EU’s General Data Protection Regulation that takes effect May 25 stands to disrupt some companies’ data collection and management practices, and potentially could hinder firms’ ability to use customer data to improve services.

Apple decision to host encryption keys in China alarms some. Apple Inc. next week is set to begin shifting iCloud accounts of its China-based customers to a local partner’s servers. WSJ reports when it does so it also will take an unprecedented step for the company that alarms some privacy specialists: storing the encryption keys for those accounts in China.

A Chinese woman reacts while setting up the facial recognition feature on her iPhone X in Beijing on Nov. 3, 2017.

FRED DUFOUR/Agence France Presse/Getty Images

GOVERNANCE

GE revamps its board of directors. General Electric Co. announced an overhaul of its board, removing several of the company’s longest serving directors and nominating three outsiders, WSJ reported. Added to the board were an accounting expert and former top executives from American Airlines Inc. and industrial conglomerate Danaher Corp.

REPUTATION

FedEx to maintain NRA discount.FedEx Corp. said it will keep a discount program for members of the National Rifle Association despite calls for it to cancel it in the wake of the Florida school shooting, Bloomberg reports. Meanwhile, Washington Post reports Georgia’s lieutenant governor threatened to withhold a tax break to Delta Air Lines Inc. if the carrier doesn’t reinstate the NRA discount program it ended after the shooting.

Court clears way for lawsuit against AT&T. A lawsuit alleging AT&T Inc. failed to disclose to customers on unlimited data plans that their internet speeds could be slowed can proceed, a California appeals court ruled on Monday, Reuters reports.

Fidelity ponders big changes to stock-selection process. Fidelity Investments, the mutual-fund giant synonymous with the star stock picker, is considering abandoning the investment process that made its managers famous, people familiar with the situation told the WSJ. The changes under consideration are the result of an outside consultant’s review since late last year of behavior within the stock-picking unit.

STRATEGY

Comcast takes on Fox with bid for Sky.Comcast Corp. entered a bid to buy U.K.-based broadcaster Sky PLC that is higher than the offer made by 21st Century Fox Inc., BBC reports. The Comcast bid could complicate a deal in which Fox agreed to sell most of its assets–including its stake in Sky–to Walt Disney Co.

Liquor company makes scotch pitch to women. Diageo PLC plans to roll out a female-branded version of its Johnnie Walker scotch brand called Jane Walker, the latest move by the liquor giant to woo female drinkers. Diageo in recent years has shifted gears to make its products more attractive to women, WSJ reports. The share of U.S. whiskey drinkers who are women ticked up to 29.6% in 2016 from 28.2% in 2010, according to Nielsen.

Johnnie Walker Black Label The Jane Walker Edition. CREDIT: Diageo

Diageo

The Morning Risk Report from WSJ’s Risk & Compliance Journal cues up the most important news in risk and compliance every weekday morning. Send tips, suggestions and complaints to henry.cutter@wsj.com.

Content from our sponsorDeloitteRisk management, strategy and analysis from Deloitte

CFOs of federal agencies can help drive cybersecurity maturity by taking a broad, risk-based approach to cybersecurity and the investments made to support it, according to Deborah Golden, leader of Deloitte’s Advisory Federal Cyber Risk Services practice, and Emily Mossburg, leader of the Secure practice in Cyber Risk Services, both of Deloitte & Touche LLP. They discuss how federal CFOs can increase their involvement in cybersecurity spending decisions, working with IT to focus on the impacts of potential cyberattacks on their agencies’ business operations and mission, and how to protect against or mitigate those impacts.

Please note: The Wall Street Journal News Department was not involved in the creation of the content above.More from Deloitte →